BRUSSELS — EU leaders endorsed unprecedented plans to use profits generated by frozen Russian state assets for Ukraine reconstruction, and called on the European Commission to make legal proposals to that effect, according to European Council summit conclusions.
“Decisive progress is needed, in coordination with partners, on how any extraordinary revenues held by private entities stemming directly from Russia’s immobilized assets could be directed to support Ukraine and its recovery and reconstruction, consistent with applicable contractual obligations, and in accordance with EU and international law. The European Council calls on the High Representative and the Commission to accelerate work with a view to submitting proposals,” they wrote.
Of around $300 billion of Russian foreign reserves frozen by countries participating in sanctions at the onset of Moscow’s war on Ukraine, the majority — more than €200 billion — sit in the EU. As Russian securities reach maturity and are reinvested by financial intermediaries, they generate a profit.
The EU has floated the idea of taxing those profits for Ukraine’s benefit — but the European Central Bank and some EU capitals, including Paris and Berlin, have expressed doubts. They are afraid the move would roil financial markets and weaken the euro’s standing as a reserve currency.
At a summit in Brussels on Friday, Commission President Ursula von der Leyen asked leaders for a mandate to make legal proposals, pointing to a supporting statement from G7 finance ministers issued earlier this month, according to people familiar with the leaders’ discussions.
In the EU, the Baltic countries, Denmark, Sweden, Finland and Poland all spoke in favor of the idea. Belgian Prime Minister Alexander De Croo demanded that all legal, macroeconomic and monetary risks involved be taken into account, as did Luxembourg’s Prime Minister Xavier Bettel, cautioning prudence.
Belgian clearinghouse Euroclear sits on €180 billion of Russian state assets, according to the Belgian government, and generated €3 billion in profits in the first nine months of the year, it said in quarterly results published Thursday. Luxembourg is home to Clearstream, another clearinghouse currently holding frozen Russian securities.
The decision comes on the last day of the European Council summit of EU leaders in Brussels. However, the idea of tapping those Russian assets for the benefit of rebuilding Ukraine after Russian President Vladimir Putin’s all-out invasion has been circulating since they were frozen under Western sanctions more than a year ago.
In June, von der Leyen pledged to create a proposal on how to leverage Russian state assets “before the summer break,” but none was forthcoming, due to concerns raised by the ECB and some capitals.
The Commission then sought to marshal a G7 statement on leveraging Russian assets for Ukraine, in order to ensure the EU would not bear the legal and financial risks of taking such an unprecedented move alone. Despite EU attempts to broker one at recent gatherings of G7 justice and finance ministers, that also didn’t happen.
EU leaders made the breakthrough as the Israel-Hamas war threatened to overshadow Russia’s war in Ukraine. Proposals are expected within the year, one Commission official said.